Retained Search or Contingency Search?

Whether handled by internal recruiters or external recruitment organizations, identifying and hiring talented personnel is never easy. Companies that are reliant on assistance from external recruiters are often frustrated by the consistent failure of these organizations to bring them the level of quality in candidates that they require. The quality of the recruitment organization, and specific recruiters within, should always be factored into any success / failure analysis. But we also need to understand the impact of the underlying hiring company – recruitment organization relationship to fully understand how consistent success or failure can occur.

When recruiting personnel, what do you really want to accomplish?


Organizations should want to hire the right person at a reasonable cost-of-hire in a reasonable time frame. There is no more sense in hiring the wrong person faster than there is in hiring the wrong person cheaper. It should be obvious that hiring the wrong person will always cost you and your company in numerous ways.


The basic formula for hiring the right person involves;

• identifying all of the technical skills, work experience, educational requirements and work personality characteristics (motivation, decision making, problem solving, leadership, communication etc.) that the successful candidate should possess, and then not settling for anything less,
• choosing the correct search methodology / firm that will be a suitable match to fulfilling the level of your requirements,
• ensuring that internal and external search personnel are accountable for success, and
• establishing reasonable progression benchmarks to ensure that the search process moves forward.

When is it appropriate to utilize the services of a third party recruitment firm?


When your current internal search methodology is not successful in finding the right candidate for a specific position you should be open to alternative candidate search methodologies. It helps to understand that different candidate search methodologies will be more successful depending on the type of vacancy that needs to be filled. Unfortunately, some organizations try to use the same search methods for all of their available positions, which is often doomed to failure because “one shoe does not fit all”. In any event, if your current process is not being successful you would be wise to investigate alternative external recruitment approaches.


What are the different company – third party recruitment search arrangements?


There are a number of different search relationship formats that can exist between a company and an external recruitment organization, but the two main types are called contingency search and retained search. Contingency search, the most common format, typically involves the payment of 100% of the search fee upon the successful placement of the candidate in the client company. This payment is often made at a predetermined time period (15 days / 30 days) after the candidate formally commences employment.


Retained search involves the provision of a deposit to the search firm, as a percentage of the total fee, at the outset of the search with the balance to be paid at a predetermined time period after the candidate formally commences employment. The overall cost to the client company is exactly the same as on a contingency search, the only difference is that a small amount of the fee is paid up front in order to engage the search firm.


When is it appropriate to use each search arrangement?


Contingency search would tend to be more successful on mass hires or for low impact positions where quality of hire is not an important issue. Candidates for these positions are readily available, easy to find and easily recruited. Companies may use contingency recruiters in instances where they do not have the internal resources to process large scale hiring programs. Retained search is more appropriate for high quality hard-to-find candidates that will fill high impact positions in your organization. These people are not readily available in the market, nor are they easy to find, and therefore require a more sophisticated and intensive search, identification, assessment and recruitment process. Companies may use retained recruiters in instances where there do not have the internal resources necessary to conduct focused targeted “headhunting” activities.


Why does contingency search typically fail on “high impact” positions?


The contingency search format often fails because there is a lack of commitment and obligation by both the hiring company and the contingency search firm. Contingency search firms have a very low success rate on high impact positions because they do not fully commit to the search assignment. Without financial support (retainer deposit) from the hiring company they are expected to absorb all initial search costs with no guarantee of recovery, or final payment, for any number of reasons. Rather than spend the required time, effort and funds to properly research, identify, assess and recruit candidates, contingency firms try to quickly “skim the surface” expending minimal effort and cost and hoping for an easy find. The problem is that quality personnel are difficult to find, and not typically available by the traditional contingency methodology of searching their own database, or promoting to the “active” candidate market through internet job boards, job fairs or newspaper ads.


In addition, without financial obligation, hiring companies utilizing a contingency approach will often mistakenly utilize a number of firms simultaneously (and continue to search themselves) under the theory that more searchers will increase the odds of finding the right candidate. Knowing this, contingency firms will be even more reluctant to put in the necessary time and effort in order to minimize their risk. After all, they are not financially obligated to their client either. And while there will be occasional wins, the dismal results that are typically experienced from this approach simply supports the concept that a number of people doing the wrong thing simultaneously will not get the right result.


The key to success


Focus on results. Determine the level of candidate quality required, and the level of impact that the position will have on your organization, and then take the time to choose the right search firm, with the right search methodology, for your specific requirements.


For high impact positions, consider a retained search firm that will commit to the successful completion of your search assignment. Whether on a retained or contingency search format, the total fee for a successful search will be the same. The difference comes in the results that are achieved through a committed search.


Partner with your search firms and commit to a successful search process.

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